Yuengling becomes largest U.S.-owned brewery

Ohio expansion, global consolidation puts Pottsville company in surprising position

Richard (Dick) Yuengling inspects bottles of Lager as they speed by on the… (MONICA CABRERA, The Morning…)

January 12, 2012|By Spencer Soper, Of The Morning Call

D.G. Yuengling and Son, which proudly bills itself as America's oldest brewery, has something new to brag about.

The Pottsville company, whose sales surged last year when it entered Ohio, has become the largest American beer-maker by surpassing Boston Beer in 2011 sales.

That's right. A beer launched by a German immigrant in 1829 to quench the thirst of Pennsylvania coal miners can claim a distinction once held by Anheuser-Busch, maker of the iconic Budweiser brand, which got gobbled up by a Belgian company a few years ago.

It's a surprising story about how an underdog prevailed while much larger American brewers fell under foreign ownership. Even beer market experts could not have foreseen such rapid changes.

And Dick Yuengling, the company's fifth-generation owner who engineered a slow-and-steady growth campaign, is in disbelief. The company used to compete with other small regional brewers. Now it's banging elbows with huge, multinational conglomerates for cooler space and beer-drinker loyalty.

"It just floors me that so much of our beer industry is owned by foreign concerns," he said. "We were not in any race to be the largest domestically owned brewer, but it's a tremendous honor for us."

Beer industry changes came suddenly in 2008, when global consolidation stripped the United States of domestic ownership of its best-selling brands. Anheuser-Busch, whose neon Budweiser signs emblazon taverns throughout the country, used to be based in St. Louis. But its headquarters have been in Belgium since 2008 when InBev bought it in a $52 billion deal to create Anheuser-Busch InBev.

With Anheuser-Busch bumped out of domestic ownership, you had to look far down the list of the country's best-selling beers to find a domestic company that made its own beer. Not Coors Light, despite its claim to the Rocky Mountains. It's made by Miller Coors, which also makes Miller Lite and has ownership interests in London and Canada.

Pabst Brewing Co.? It sells a lot of beer and is owned by a U.S. investment firm. But it doesn't make its own beer. Its production is outsourced to a British-owned brewing company.

That left small craft brewer Boston Beer, which makes Samuel Adams and has a plant in Fogelsville, as the country's largest domestic-owned brewery in 2008. And Yuengling was a close second.

The two companies have since been neck-and-neck in sales until the end of 2011, when Yuengling started selling beer in its 14th state, Ohio.

Yuengling sold 2.5 million barrels of beer in 2011, up 17 percent from the previous year, according to Beer Marketer's Insights in Suffern, N.Y., a magazine that tracks the beer industry. Boston Beer sold 2.4 million barrels in 2011, the magazine estimated.

Boston Beer, a public company, has yet to release final sales for 2011. Beer Marketer's Insights based its estimate on Boston Beer sales in the first three quarters and the company's own sales forecast for the fourth quarter.

Even if Boston Beer had a surprisingly good fourth quarter, it wouldn't close the gap with Yuengling, said Eric Shepard, editor of Beer Marketer's Insights.

"It would take a weird December miracle," he said.

Yuengling is expected to retain the distinction for the foreseeable future. Its 2012 sales will likely increase since this will be its first full year in Ohio.

Yuengling attributed the success in Ohio to a good network of distributors and retailers who helped establish the brand in supermarkets. Brewers are at the mercy of distributors and retailers for access to customers, he said, and Yuengling doesn't enter new markets unless it knows those middlemen are committed to its success.

"The distributors got our brands in all of the grocery chains and the grocery chains gave us big displays," Yuengling said. "They gave us a chance and they gave consumers a choice."

Beer drinkers have reacted to global consolidation. Anheuser-Busch InBev remains the dominant U.S. sales leader, moving 98.8 million barrels in 2011. But its sales dropped 7.7 percent from 2008 to 2011, according to Beer Marketer's Insights. Sales of Yuengling, meanwhile, jumped nearly 40 percent over the same period.

Yuengling's chief operating officer David Casinelli said the company was inundated with letters from customers after the Anheuser-Busch InBev deal was announced.

"We received letters imploring us not to sell out and do what they did," Casinelli said. "There are obviously a lot of people who pay attention to that stuff and take it seriously."

Yuengling could continue to expand its market. The company has been fielding interest from distributors in Louisiana and Texas and New England beer drinkers have been clamoring for the company to expand farther north. But the company has no immediate plans for that and for now is focused on meeting increased demand in its existing market, Yuengling said.

"Our game is longevity," Yuengling said. "Being the biggest doesn't matter. We want to see how long we can survive. My daughters Jennifer and Wendy are in the business now and we want their kids to be able to run it some day. That's what's satisfying to us."